Steps
Late entry → worse fill → tighter stop (to keep same $ risk) → stop-out → immediate re-entry (because move continues) → repeated friction losses → revenge sizing → account death by a thousand cuts.
Intervention points:
- Cut size at the first sign the chain is forming.
- Pause when you start “fixing” the last loss with a new trade.
- Stop trading when execution quality degrades.
Antidote
Trade levels, not moves. If you miss the level, let it go.
If you must re-enter, wait for a new location with a new invalidation point. Never re-enter just to erase the feeling.
- Stop the sequence: one loss is information, two losses is a warning, three losses is a system failure. Have a hard cut.
- Reduce degrees of freedom: fewer pairs, fewer timeframes, fewer discretionary choices.
- Re-enter only after reset: calm state, checklist passed, size reduced.
Notes
Tell: if your stop is only tight because your entry is bad, you’re no longer trading your system. You’re trading your lateness.
Field checklist
- Measure spread before entering. If it’s abnormal, you’re trading the wrong product at the wrong time.
- If volatility expands, reduce size first. Don’t “solve” it by widening stops with the same size.
- Avoid the predictable liquidity holes: rollover, session open/close, first minutes after data.
- Assume your stop may fill worse than your entry. Price the worst-case, not the brochure.
- If you cannot explain where liquidity comes from, trade smaller.